1 Improving Cost Management
1. Water companies, farmers and industry abstract,
on average, around 36 million litres of water a day under licence
from the Environment Agency. The Agency regulates this abstraction
by visiting sites to check water levels and to monitor the impact
on the local environment. The Water Resource Act (1991) requires
the Agency to recover the costs of this regulation from the abstractors,
and any reductions in the £114 million annual cost of this
activity would have a direct impact on licence fees.[2]
2. The Environment Agency has reported efficiency
savings of over 3% for each of the last three financial years,
and the Agency believed it could make further savings of £4.1
to £4.5 million in the next three years. The Agency did not,
however, have sufficient information to show how funds were spent
across its different water resource management activities. The
Agency had started from a situation of poor information technology
systems, and cost information had been based on functions rather
than activities. Following implementation of new computer systems
to provide better information on finance and manpower, the Agency
was developing an activity based costing system to apportion costs
and people to activities rather than functions. [3]
3. The need for better information was identified
by the Agency in 2001, but progress has been slow:
- Implementation of activity
based costing had cost £600,000 up to December 2005, including
£307,000 for consultancy. The Agency did not have a target
date for introducing activity based costing, although it expected
the project to take at least a further two years.
- The replacement value of the Agency's assets
amounted to some £20 billion, and the Agency spent some £400
to £500 million per annum on their renewal, upkeep and maintenance.
The Agency would not be introducing an asset management strategy,
however, until April 2006. The direct costs of developing the
strategy were expected to be £200,000 including consultancy.
The Agency had improved its asset records, but the delay in completing
the strategy was partly due to difficulties in recruiting someone
with sufficient experience to oversee implementation. The Agency
had appointed an independent consultant since June 2005, to support
an internal staff member, as external recruitment had been unsuccessful.[4]
4. The introduction of better information systems
should enable the Agency to manage its regulatory activities more
effectively. Agency staff undertake 147,000 site visits a year
to retrieve recorded data on, for example, flows, levels and precipitation;
to check that instruments are working correctly; or to install,
recalibrate or replace instruments. The frequency of visits varies,
however, by region of the country. Visits to surface water flow
continuous measurement sites, for example, range from an average
of 18 a year in the North West Region to 33 in the Midlands Region
(Figure 1). There was scope to reduce the frequency of
visits, and be more risk based, but the same risk could not be
applied to every site, as each had different purposes and degrees
of criticality.[5]
Figure1: The variation in the average number of visits each year to
surface water flow continuous measurement sites by each region
Source: National Audit Office
5. New technologies could improve efficiency by recording
and transmitting data automatically, reducing the frequency of
site visits. Automation was not appropriate in all cases (for
example, 18% of sites were simple rain gauges monitored by volunteers
at no cost to the Agency), and technology was already used at
some locations to record data and transmit the results automatically.
Sufficient information on the cost of installing and running new
technology at sites and on the potential cost savings from reduced
site visits will be essential to deliver efficiency savings. In
2004 the Agency had established a Technology Evaluation Group
to identify opportunities to further exploit existing technologies
and to evaluate new technologies.[6]
2 Q 43; C&AG's Report, paras 1.2-1.4 Back
3
Qq 3, 10, 15-16, 40-41 Back
4
Qq 11-16, 24-32; Ev 9 Back
5
Qq 5, 36; C&AG's Report, paras 3.12, 3.17 Back
6
Q 6; C&AG's Report, paras 3.21-3.25 Back
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